Technical Analysis: Nifty's Ascent to Record High Hinges on 22,400 Support; VIX Reaches 20-Month Peak

In-depth analysis suggests Nifty's path to a historic peak depends on maintaining support at 22,400, while the VIX hits its highest level in 20 months, indicating potential market volatility ahead.

According to this options data, the challenge for Nifty's upward movement persists between the 22,600-22,800 range, while immediate support is seen at 22,400 followed by 22,200 levels.

Market Uptrend

For the second consecutive session, the Nifty 50 closed above the 22,500 mark, despite volatility nearing a 20-month high on May 21. Analysts suggest that if the index maintains the 22,400 level, aligning with Tuesday's low and the mid of the Bollinger band, it is likely to progress towards the 22,600-22,800 zone in upcoming sessions, with intermittent consolidation. The critical support area remains between 22,300-22,200 levels.

The Nifty 50 initially opened lower at 22,405 but gained momentum during late morning deals, ultimately settling at 22,529, a 27-point increase, with above-average volumes. A bullish candlestick pattern formed on the daily charts, extending the streak of higher highs for the seventh consecutive session. Additionally, it traded above all major moving averages, with an upward bias evident in the RSI (relative strength index) momentum indicator, positioned at 57, up from 56.16 levels on the daily charts, signaling a positive trend.

As per Jatin Gedia, technical research analyst at Sharekhan by BNP Paribas, the Nifty has been undergoing a recovery phase after testing the lower boundary of the ascending channel on the daily charts. Currently, it has approached the 22,570 – 22,600 zone, where resistance is indicated by the 78.6 percent Fibonacci retracement level.

"Given that prices have reached a critical level (around 22,600) and there's a decrease in momentum on the hourly timeframe, we can anticipate the Nifty to consolidate over the next few trading sessions," he remarked. "Maintain a stop-loss of 22,400 for long positions."

Based on the weekly options data, the highest Call open interest was noted at the 23,000 strike, followed by the 22,500 and 22,800 strikes, while the most significant Call writing occurred at the 23,000 strike, followed by the 22,600 and 22,900 strikes. Conversely, the maximum Put open interest was observed at the 22,500 strike, followed by the 22,400 and 22,000 strikes, with the most substantial Put writing seen at the 22,500 strike, followed by the 21,800 and 22,200 strikes.

This data suggests that Nifty faces resistance levels between 22,600-22,800, while immediate support lies at 22,400 and then 22,200 levels.

Bank Nifty

Bank Nifty exhibited weaker performance compared to the Nifty 50, dropping 151 points to 48,048. It formed a bullish candlestick pattern with a long upper shadow on the daily charts, suggesting selling pressure at higher levels. Despite this, the index struggled to surpass the 48,400 mark, where the 20-day moving average (20DMA) is situated.

Kunal Shah, senior technical & derivative analyst at LKP Securities, highlighted, "A break above this level will trigger a fresh upward move. The lower-end support lies at 48,000, which coincides with the highest open interest on the Put side." He emphasized that the index must decisively breach these levels on either side for significant trending moves in the near term.

Meanwhile, the India VIX, also known as the fear index, surged above 21 levels, instilling caution among investors. The VIX spiked sharply by 6.26 percent to 21.81, marking its highest closing level since September 28, 2022, compared to the previous level of 20.53.

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Source: moneycontrol